Kutak Rock Leads Team Securing Significant 10th Circuit Victory

News | July 13, 2017

Kutak Rock attorney Richard Olmstead led a team of attorneys in a significant appeal victory in the U.S. Tenth Circuit Court of Appeals for firm client Northern Natural Gas Company (“Northern”). In 2008 and 2010, Northern secured authority from the Federal Energy Regulatory Commission to expand the certificated boundaries of its Cunningham, Kansas underground natural gas storage field to mitigate and prevent the escape of storage gas into roughly 12,000 acres to the north, which was being produced and sold, for significant profit, by various oil and gas producers. Unable to acquire by agreement all of the property interests to effectuate the FERC certificates, Northern initiated a condemnation action to acquire over 9,000 acres of underground geological formations, as well as various surface interests and existing well bores.

At the trial court level, the district court ordered that Northern was obligated to compensate the defendant landowners and oil and gas producers for storage gas which Northern originally injected into the Cunningham Storage Field and which was drawn into the area to be condemned by the defendants’ ongoing gas production. While Northern already secured a significant victory at the trial level by securing an award of just compensation more than $100 million below what was sought by the defendants, it nevertheless appealed, arguing, among other arguments, that Kansas law recognized Northern as the rightful owner of storage gas located under the area to be condemned.

The Tenth Circuit adopted Northern’s arguments regarding storage gas ownership in whole, holding that Northern owned all storage gas in the condemned area as of the date of the FERC certificate. Additionally, the Tenth Circuit confirmed the district court’s denial of defendants’ request for attorneys’ fees and their request for $3.2 million for the eight well bores acquired by Northern. As a result of this significant appellate victory, Northern will recognize a savings of in excess of $7 million.

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